Fox Analysts Warn: 'We Should Have Seen This Coming'

• Shares of Twenty-First Century Fox Inc (NASDAQ: FOXA) are trading close to their 52-week low, having lost 18 percent since November 9.
• Bernstein’s Todd Juenger maintained an Outperform rating for the company, with a price target of $35.
• Continued guide-downs by the company reduce investor confidence on its ability to achieve set targets, Juenger stated.

Twenty-First Century Fox reported its F2Q16 adjusted EPS at $0.44, in-line with expectations. However, the company lowered its FY16 guidance from “mid-single” growth in adjusted OIBDA to “flat-to-low-single.”

Analyst Todd Juenger mentioned that although this reduction in guidance was expected, the extent of the guide-down was more severe. He added that this could translate to the impact on the stock being higher than was earlier anticipated.

Juenger pointed out that the guide-down also has the effect of reducing confidence in the company’s indications of future growth, including Star India’s path to achieving an EBITDA of $1 billion in 2020.

“We believe visibility of Star India (ideally supported with direct disclosure of results) – if it materializes – could be a significant positive catalyst. But we wouldn't expect to see it until at least 1H of FY17 (or later),” the Bernstein report stated.

Juenger believes that a significant inflection in cash flow growth in FY17-18 will force the stock up eventually.

Twenty-First Century Fox’s strength lies in its strong affiliate fee pricing power in the US and non-advertising growth driven by TV production and retrains. Concerns over advertising and challenges from ratings at Fox Broadcast “are relative to the company growth power of affiliate fees and retrans,” Juenger added.